Live updates: Follow the latest news on US-Iran war
US equities futures slipped, but Gulf stocks rallied, and oil prices surged, after conflicting messages from the US and Iran over talks to end the Middle East war reignited geopolitical risk.
Oil prices fell sharply on Monday afternoon, moments after US President Donald Trump said military strikes on Iran's energy infrastructure had been postponed following talks with Tehran that could potentially end the US – Israel war with Iran.
However, Brent rallied past the $100 per barrel mark again after Iran denied talks with the US. The benchmark for two-thirds of global oil rose 2.72 per cent to $102.66 at 11.12am UAE time after falling 10.9 per cent on Monday.
West Texas Intermediate, which tracks US crude, is trading 2.84 per cent higher at 90.63 a barrel after closing 10.4 per cent lower in the previous trading session.
“Oil prices fell sharply yesterday after the social media post by Donald Trump increased optimism about an imminent end to the conflict … [but] push back by Iranian officials has seen prices pick up again this morning in early trading, but still not back to levels seen on Monday morning,” Daniel Richards, senior economist at Emirates NBD, said.
Geopolitical headlines from the Middle East are affecting markets across asset classes, with the war, the worst the region has faced, entering its fourth week.
All eyes are fixed on the Strait of Hormuz, which effectively remains shut since February 28, when the US and Israel started bombarding Iran. The narrow waterway is the choke-point through which 20 per cent of the world’s oil flows. The closure of the passage has not only caused an energy crisis in Asia and Europe, which are largely reliant on oil and gas supplies from the Middle East, but it is also threatening a severe dent to global economic growth.
There was a sharp reaction across asset classes when Mr Trump surprisingly announced a pause to strike on Iran’s power and energy infrastructure.
However, Tehran has vehemently denied any direct or indirect talks with the Trump administration.
Mr Trump has claimed there are “major points of agreement” with Iran, and that talks with two senior US envoys proceeded late into Sunday evening, which progressed “perfectly”.
The speaker of the Iranian parliament, Mohammad Bagher Ghalibaf, declared Mr Trump’s claim to be “fake news”. However, American news outlet CBS quoted a senior Iranian Foreign Ministry official as saying that Iran has received points from the US through mediators, which are being reviewed.
“Brent opened above $100 a barrel amid signs that conflict in the Middle East is far from over. If there are further signals that send crude prices noticeably higher, then another day of whiplash across assets would be the result,” said Bloomberg analyst Garfield Reynolds.
Mixed equities reaction
Stocks in Asia gave up steep gains following Monday's relief rally on Wall Street, but shares in the Gulf region that have taken a battering since the beginning of the war, rallied during early trade on Tuesday.
The Dubai Financial Market General Index climbed 2.45 per cent, helped by gains in property and banking stocks.
Emaar Properties, the biggest developer in the emirate by market capitalisation, advanced more than 4 per cent, while its unit Emaar Development added 1.9 per cent.
Dubai’s top bank, Emirates NBD, surged more than 2.5 per cent, while budget carrier Air Arabia added 1.14 per cent.
Abu Dhabi's equities benchmark also rose 0.5 per cent, helped by more than 4 per cent surge in shares of energy company Taqa as well as a 6 per cent jump in RAKBank shares.
Main gauges of Saudi Arabia and Qatar, however, fell with Saudi Tadawul trading 0.35 per cent lower and the benchmark in Doha slipping 1.14 per cent.
Stocks in Kuwait added 0.87 per cent while the Muscat bourse advanced 0.4 per cent.
Stocks in Asia and beyond lost early momentum and posted modest gains, with Australia's benchmark adding 0.22 per cent, Japan's Nekkei 1.4 per cent, Hong Kong's Hang Seng advancing 2 per cent, while the Shanghai Composite index rose 1.08 per cent.
Futures of the S&P 500, which added 1.15 per cent on Monday, slipped 0.4 per cent, while Euro Stoxx 50 futures fell 0.8 per cent, FTSE 100 Index futures in London were down 0.28 per cent, while CAC 40 Index futures in Paris slipped 1.82 per cent.
Gold and bitcoin
Gold, which has taken a hammering since the beginning of the war, swung between red and green on Tuesday.
Gold prices, which posted their largest weekly percentage drop in more than 14 years and their largest weekly drop in value since 1983 on Friday, slumped more than 1.6 per cent on Tuesday but recovered ground to trade 0.14 per cent higher at $4,410.62 per ounce, according to GoldPrice.org.
Gold has hit record highs this year and reached an all-time high of $5,608.35 an ounce in January. Although it has lost some ground, the precious metal is still more than 20 per cent higher since the beginning of this year, after rallying 64 per cent last year.
Bitcoin, which fell 0.8 in Asian trade, also recovered to trade 4 per cent higher at $70,574.40. Fears of inflation tied to the Iran war have rattled bitcoin investors. The world’s biggest cryptocurrency has dropped from its six-week high of nearly $76,000 on March 17, as volatility in global markets continues.
